In the summer of 2017, Nikil Viswanathan and Joe Lau cofounded Alchemy. The business was actually in their San Francisco apartment.
Both Viswanathan and Lau were graduates in computer science from Stanford University. They had worked at companies like Google, Microsoft, Facebook, and Pinterest.1 They also founded several companies.
But there was one that would be a rocket ship – Alchemy . From the start, the startup was focused on creating a development platform for the blockchain.
The growth accelerated at a fever clip in 2021. In April, the company raised $80 million in a Series B round at a valuation of $505 million.2 Then by October, Alchemy did another fund raise. This time it was for $250 million at a $3.5 billion valuation.
But the company was not done. In February 2022, Alchemy raised $200 million at a $10.2 billion valuation.
Then again, the company was profitable and generating over $1 billion in value per month from its blockchain platform. Some of its marque customers included OpenSea, Dapper Labs, and Adobe. Alchemy’s business model was to charge based on the usage of its compute resources.
The company was also very lean and did not use much of its capital. For example, there were fewer than 30 employees. No doubt, the company was selective with its recruiting – and this proved critical in creating a standout platform.
The case of Alchemy highlights the huge growth potential for Web3. But it also shows the importance of development tools. Because of the complexities of blockchain, there needs to be different approaches.
In this chapter, we’ll take a look at what founders need to know about what’s available and how to evaluate the tools.
The Web3 Tech Stack
The tech stack describes the tools for product development. These include libraries, platforms, IDEs, databases, web services, and so on.
MongoDb: This is a NoSQL database.
Express: This is a Node.js web framework. It helps with server-side activities like URL routing and HTTP requests and responses.
React: This allows you to create dynamic front-end interfaces using JavaScript.
Node: This is a JavaScript web server to run the applications.
With the MERN stack , you can create highly sophisticated web applications. Some of the companies that use this technology include UberEats, Instagram, and Walmart.3
Then what is the Web3 stack? Well, this is still evolving. It will probably take a few years until there will be standards like MERN.
But of course, founders cannot wait. They need to make decisions on the types of technologies to use. And yes, this means there are risks. First of all, there is the selection of the type of blockchain. Next, you will look at those tools that can best achieve your goals.
“Specific projects may require specific tools or programming languages, but I would encourage first principles learning around distributed systems architecture and encryption protocols, or for the front-end developer or designer, gaining competencies in how to express visually what is happening behind the scenes of a distributed network and how that brings value to the user,” said Jennifer Hinkel, who is the Managing Director of The Data Economics Company. “Because these ways of thinking are, in some cases, a complete paradigm flip of architecture for ‘Web2’ platforms and applications, I think it’s important for developers to spend time getting a firm grasp of the distributed architecture paradigm and its links to economic value.”4
Am I building an application?
Am I building a platform?
Am I building an infrastructure tool?
Of course, this will lead you to different tech stacks. “Depending on what you’re aiming to build, you’ll be relying on different levels of the technology stack, and therefore will have to make choices around what you build on and build with and what you need to be compatible with,” said Hinkel. “If someone builds an infrastructure tool, it is true that they may also build prototype platforms and apps to prove out its use.”
In Web3, the different components of the tech stack are divided into layers. We’ll take a look at these next.
Layer 1
Layer 1 is the foundation of the underlying blockchain. It’s what makes it operate, allowing for Bitcoin, Ethereum, and altcoins.
This is the low-level technology, which includes the complex network infrastructure, hardware, and connections. It makes it possible to facilitate the transactions and create and run smart contracts. For example, it’s at Layer 1 where there are the consensus algorithms like proof-of-work (PoW), proof-of-stake (PoS), proof-of-reputable (PoR), and so on. This is also where the encryption is handled as well as the Ethereum Virtual Machine (EVM) is in operation.
For an infrastructure startup, a founder may need to work a Layer 1. This would also be the case if you are creating your own tokens or cryptocurrencies. But if you are building an application, then you really just need to have a basic understanding of this technology.
Layer 2
Layer 2 involves solutions that help improve the performance, and efficiency of the underlying Layer 1 protocols. Again, this is mostly for infrastructure startups.
As should be no surprise, the Layer 2 category has seen lots of growth. This is no different than what happened during the early days of Web1. The reason is that there needs to be the creation of a solid technology infrastructure to allow for consumer and enterprise applications.
PoS: This is much faster and environmentally friendlier than the original PoW protocol.
Sharding: This has been critical in allowing more scale. There is no need to work on transactions on a sequential basis, but instead in different chunks or shards. Also, there is no requirement to have the nodes have a full copy of the blockchain.
Block Size: This allows more transactions to be processed in each block. An example of a Layer 2 system for this is SegWit, which is for Bitcoin. By excluding the digital signature data, there has been more room per block.
Even with the enhancements, the user community may not be in agreement. Making changes can take time – and face resistance when it comes to the Layer 2 platforms. Because of this, there may ultimately be hard forks, which create new ones.
When it comes to Layer 2 , there are certainly many options, and this is a challenge for entrepreneurs. It could mean that you may invest a substantial amount of resources on a platform that could ultimately be marginalized or even becomes obsolete.
The fact is that the core infrastructure will probably operate according the Power Law. This is a concept from statistics, in which a change in one quantity results in a larger change in another. For example, if you double the length of a side of a square, it will mean a quadrupling of the size.
What does this have to do with technology? It really is about the importance of standards. When one emerges, it generally dominates. This is what has happened with operating systems, whether Android, iOS, or Windows.
And the same is likely to happen with the core blockchain platforms. There simply will not be enough resources to keep building on multiple ones. Although, as of now, there has yet to emerge an Apple, Google, or Microsoft of the Web3 ecosystem.
To build scale, Layer 2 operators are providing financial incentives. This is often about paying third parties to create applications and solutions on their platforms. True, for entrepreneurs, this can mean quick money. But for the long run, it could be the wrong approach. For example, Microsoft did this with its mobile OS. But ultimately, it failed because Apple and Google became the dominant players in this category.
Keep in mind that Web1 provides a historical perspective. There was a huge amount of investment in the telecom infrastructure of the Internet. But this was overdone and there was an oversupply of resources. As a result, many of the players in the infrastructure space failed. This could very well be the case with the Layer 2 sector .
Something else to consider: from the Web1 phase, the big winners were not the infrastructure players. Instead, they came from the application side, such as Amazon.
Despite all this, there remains much to be done with Web3 infrastructure. Here’s the viewpoint from an Andressen Horowitz blog: “On Layer 2 blockchains , scaling transactions and speed to meet growing demand has been a consistent challenge. The rapid growth in applications, which is the hallmark of this industry’s success, will only exacerbate the need for dynamic and reliable infrastructure. In addition, programmability is one of the core benefits of blockchains, but smart contract languages may have unintended loopholes that hinder the interoperability and security of services and users’ assets such as NFTs.”5
Security: True, this is a problem with all technologies. But with blockchain systems, the risks of security can potentially be more severe. The reason is that there is often a reliance on using financial assets.
Decentralization: This is about allowing peer-to-peer transactions with little friction.
Scale: For there to be a truly global system for Web3, this is crucial. But with current blockchain systems, there are often problems with congestion and fees. The result is that the performance can be lacking – and this may mean lower adoption of Web3 technologies.
For Ethereum , it has done a good job with the first two factors. But as we’ve seen in this book, the third factor is often a problem. Perhaps the reason is the creators of Ethereum did not think this technology would be so popular.
OK then, so what does all this have to do with Layer 2 ? Well, it is generally about the applications on the Web3 platform. However, this really has been for creating technologies to help with the scaling – but without sacrificing security and decentralization. It has become a very big business, actually. And the growth is likely to continue for some time.
For the most part, Layer 2 is about finding ways to increase the speed of transactions – which is often called faster finality – and higher transaction throughput (which refers to transactions per second). Keep in mind that there are many startups gunning for this. There are also lots of top VCs that are investing substantial amounts.
In the next few sections of this chapter, we’ll take a look at a few of the top startups in the Layer 1 and Layer 2 categories.
IoTeX
The Internet of things or IoT is a network of physical nodes, which use sensors and software. With this, it is possible to provide a connection to the Internet to allow for the exchange of information. Examples of IoT devices include home appliances, baby monitors, industrial tools, and even self-driving cars.
The IoT market is massive and is expected to grow at a rapid clip. According to McKinsey, the network will – by 2025 – have over 75 billion smart devices that produce 80 trillion gigabytes of data.6 The value of this is estimated at $11 trillion.
Despite all this, there are nagging issues with IoT, such as with security, privacy, and integration. But Web3 and blockchain could help out.
This is the bet for IoTeX , which is a startup. The company, which was founded in 2017, is developing a decentralized Layer 2 IoT platform. It allows the users to have control over the data that their devices generate. They can even monetize this, which is done with its MachineFi technology. Note that there is the IOTX token.
IoTeX also creates their own devices. For example, there is Ucam, which is a sophisticated home security camera. Then there is the Pebble Tracker. This is a smart GPS system, which collects temperature, humidity, and air quality data – in real time.
IoTex uses an EVM-compatible blockchain, which allows for dApps and smart contracts. The platform has been operating since early 2019 and has had a high degree of stability.7
Mina Ecosystem
Launched in 2017, Mina Ecosystem is very light. The blockchain size is only 22 kilobytes or about the size of a few tweets. Because of this, it has proven to be quite useful for smartphones and other devices.
The Layer 2 Mina Protocol was also built with strong security and privacy functions. To this end, it uses zero-knowledge proof applications and smart contracts. This means that the system verifies data without the users having to give up their data. Mina Ecosystem has used this technology to create its own flavor of smart contracts, which are called zkApps. Another advantage is that it is easy to program the applications.8
In March 2022, Mina Ecosystem raised $92 million.9 This was certainly a major validation of the zero-knowledge smart contract category.
According to Brian Lee, a partner at FTX Ventures: “Mina’s lightweight blockchain architecture allows the protocol to reach a new level of decentralization by enabling everyone to easily participate in the network. That, combined with its native data-privacy capabilities makes it a unique L1 with massive potential to shape the future of Web3.”10
Mysten Labs
In 2021, Evan Cheng, Sam Blackshear, Adeniyi Abiodun, and George Danezis cofounded Mysten Labs . Before this, the team worked at Novi, which was the crypto division at Meta. The cofounders helped to create the Move programming language as well as the Diem blockchain.
While Meta had the benefit of lots of resources, it was difficult to make progress. One of the main reasons was the onerous regulatory scrutiny.
So, for the cofounders, it seemed that a better path was to create a startup. For Mysten Labs , the focus is on building advanced infrastructure technology for the Layer 1 blockchain called Sui. This is a next-generation version of Diem, which uses a PoS protocol that is permissionless. You can also use the Move language to create smart contracts.
The big differentiation then? It has potentially unlimited throughput or transactions per second.11
As for the business model, it is similar to the approach for many infrastructure operators. That is, the company generates revenues by getting a percentage of the tokens from the different blockchains. It is essentially an ownership model.12
StarkWare
Uri Kolodny is a serial entrepreneur. He cofounded OmniGuide, which developed precise optical laser scalpels for minimally invasive surgery. He then went on to start TimnaTimna. The company created an ultrasound therapeutic product for cardiovascular problems.13
But after this, he would move into the software business. For example, he launched Mondria Technologies, which focused on a new type of declarative programming language for visualizing data.
The experience would prove critical for his Web3 play – Starkware . Founded in 2017, the company is a top developer of Ethereum scaling solutions. The two main ones include StarkEx and StarkNet. They make it easier for people to create dApps on the Ethereum network.
StarkWare has created its own language, which is called Cairo. It has been in production since June 2020. Although, you do not have to use this language for StarkWare. The company has been building transpilers for other systems.
StarkWare uses a zero-knowledge rollup. This means that the verification is based on combining transactions, which speeds up the performance and allows for lower fees. StarkWare has also invested heavily in its security infrastructure. As for the customers, they include many top Web3 providers like Immutable, dYdX, and ConsenSys.14
Since inception, StarkWare has raised $173 million.15 Some of the investors include Sequoia Capital and Paradigm.
Matter Labs
When Alex Gluchowski launched his Web3 startup – Matter Labs – in late 2018, he did not have a crypto background. The two prior companies he started included a camper rental marketplace and a website for holistic lifestyles. Yet he gained valuable skills from these ventures.16 He learned how to build modern and scalable web platforms, manage remote teams, implement payment and bookkeeping systems, create compliance automations, and work in international markets.
Regarding Matter Labs , it is based on the Layer 2 protocol called zkSync. For more efficiency, the funds for a smart contract are on the mainchain, but the computation and storage are handled off-chain. This essentially means that the transactions are rolled up to a block. In fact, Ethereum co-founder Vitalik Buterin wrote in his blog that for the medium to long term, the zero knowledge rollups “will win out in all use cases…”17
Matter Labs has built an intuitive user experience, but has also been strong with security features. This has helped to gain traction with customers, especially in the DeFi space.
The Matter Labs platform uses Zinc, which is a framework for creating smart contracts. This is important since zero-knowledge-protocol frameworks generally lack these capabilities. The syntax of Zinc is similar to the Rust language. Although, Matter Labs is working on a Solidity implementation.
In late 2021, the company raised $50 million. Andreessen Horowitiz, which invested in the round, wrote a blog about the Matter Labs : “The activity on Ethereum L1, between DeFi, governance, NFT trading, DAO creation, and gaming has surpassed our wildest imagination in terms of creativity and progress. One way to explain the ingenuity we’re seeing comes back to the core idea of self-sovereignty inherent to cryptography, and essential to the ethos of web3. zkSync is building (and enthusiastically hiring!) for the next generation of developers and will unleash rippling waves of originality into the already vibrant Ethereum ecosystem.”18
Optimism
Jinglan Wang is a rarity in the Layer 2 infrastructure world. She is one of the few female CEOs and cofounders of a top startup in the industry: Optimism .
Since college, she has been fascinated with blockchain. She would become the co-president of the MIT Bitcoin Club, where she greatly expanded her network of industry contacts.
She did not finish her degree and instead started a company called Eximchain. Then she went to Zcash and Nasdaq, where she was a product manager for blockchain projects.
She would actually get a scar because of Ethereum. How so? When ETH hit $300, she was at a bar with friends. She was so excited that she fell out of her chair and split her ankle open.19
But it was Optimism that would become her breakout venture. In March 2022, she raised $150 million in a Series B round from Andreessen Horowitz and Paradigm. The valuation was $1.65 billion.20
The core technology of Optimism is different from a zero-knowledge rollup. Instead, it uses an “optimistic rollup.” This is about using a group of validators to verify transactions, not cryptography. At the time of the funding, the Optimism platform had over $500 million in locked value.21
One of the keys to the success of Optimism has been mostly to stick to the Ethereum approaches.22 This has leveraged the large ecosystem, but has made it easier to get started.
There is often confusion between Layer 2 and sidechains. But they are very different. A Layer 2 system is built on the Ethereum platform. A sidechain, on the other hand, runs parallel to it. It is a separate blockchain, with its own security and consensus approaches. A top sidechain is Polygon.
Offchain Labs
Ed Felton is 59 years old. Yet his age has not been a problem with being the co-founder and chief scientist of a red-hot Web3 startup, Offchain Labs . Actually, Felton has a deep academic background. He graduated from the California Institute of Technology in 1985 with a degree in physics and got his Ph.D. at the University of Washington. He wrote his thesis about communication protocols for parallel processors.
In 1993, he joined the faculty at the Princeton University in the Department of Computer Science. He would then serve as the Chief of Technologies for the Federal Trade Commission as well as the Deputy US Chief Technology Officer for President Obama.23
The origins for Offchain Labs started with Felton’s research efforts at Princeton. He met his cofounders there – Steven Goldfeder and Harry Kalodner – and they started to create a Layer 2 platform called Arbitrum. This started in 2015. The goal was to make Ethereum available to anyone.24
Offchain’s platform is based on the optimism rollup, and it has gained lots of traction. In 2021, there were more than 350 teams using it. Some of the partners include companies like Uniswap and Chainlink.
The company raised its Series B for $100 million and the lead investor was Lightspeed Venture partners. The valuation was set at $1.2 billion.25
In a blog post, Lightspeed investor Amy Wu had this to say: “A lot has been written about how L2s work and the differences between optimistic and zero-knowledge roll-ups, and which are theoretically better. In deciding to lead Offchain Labs’ Series B , we focused on the most important thing: what is easier and better to use for developers.”26
Layer 3
Layer 3 is known as the application layer . This is where you have programs like dApps as well as the protocols that power them. These apps can be virtually anything. However, much of the development has been with areas like NFTs, gaming, and DeFi.
There are two main parts of Layer 3. First, there is the application itself, which is what the user interacts with. This often involves scripts and APIs.
Next, there is the execution. This is about managing the rules and conditions of the smart contracts on the blockchain. Essentially, this is the underlying code. Thus, there is coordination of actions between the application and execution.
In chapters 7 and 8, we will look deeper at the Layer 3 programs and systems. And as for the rest of this chapter, we will cover the different types of Web3 frameworks and libraries as well as the languages.
Web3 Frameworks and Libraries
It’s common for people to treat the words “library” and “framework” as if they were the same. But there are important differences.
Granted, both are code bases, and they provide often-used features, such as for authentication, UI, or security. And many of them are based on JavaScript or TypeScript. Libraries and frameworks can definitely be a big help in speeding up development projects.
So, what are the differences then? It comes down to the concept of inversion control. Basically, with a library, you have more control over the workflow of the program. A framework, on the other hand, provides its own paths. This is similar to the use of an API.
Web3.js (Library): This provides a set of functions for on-chain transactions and components for Ethereum nodes. This basically makes it easier to handle the JSON RPC mechanism for the transmission of the data (this is a standard format). This is done by using JavaScript code. Web3.js also works seamlessly with Node.js web applications and Electron desktop programs. It’s common for developers to use the Metamask browser extension with this library, which is an in-browser Ethereum wallet.
Ethers.js (Library): This uses JavaScript and TypeScript to provide four main modules to interact with Ethereum. Ethers.provider allows for the transactions; ethers.conrtract helps to deploy and manage smart contracts; ethers.utils provides the formatting and processing of data for dApps; and ethers.wallet makes connections to Ethereum addresses.
oo7.js (Library): Yes, this is named after James Bond. In terms of the technical aspects of this library, it’s about using reactive expressions or bonds. This essentially makes it possible to understand when values are triggered on a smart contract for Ethereum.
Truffle: Consensys created this in 2017. Truffle is a comprehensive framework that has easy-to-use tools for creating, debugging, and deploying smart contracts for Ethereum. It also has integrations with popular Web frameworks like React, Angular, and Vue. With Truffle, you can use Solidity or JavaScript for the coding. Another helpful feature is that this framework manages the network artifacts. Truffle also includes Ganache, which is a rich set of GUI components.
Hardhat (Framework): This allows you to create a marketplace – with little work. This handles all the complex matters of managing digital assets. The framework supports Django and Ruby on Rails web frameworks. Hardhat also has strong debugging capabilities for Solidity, which are bolstered by a rich ecosystem of plugins.
OpenZeppelin SDK (Framework): Launched in 2018, this is a framework built on the Python language and provides components for NFTs and other tokens. A major advantage is that it has strong security features built in. The OpenZeppelin SDK comes with its own development environment, which is called Jesta. But perhaps the most powerful function of this framework is the ability to upgrade existing smart contracts.
Brownie Framework (Framework): This is based on Python and provides for creating smart contracts on Ethereum. For the development, you can use Solidity or Vyper. The Brownie Framework uses the web3.py library, which has shown to work on intensive environments.
An oracle allows for hybrid smart contracts. These work with both on-chain and off-chain data. A top solution in this category is Chainlink. It is built on a variety of technologies like Java, C++, Python, and Node.js.
Web3 Languages
As we’ve seen, Web3 relies on a variety of languages. Some have been around for many years like Java, JavaScript, C++, and Python. But there are some languages that were built specifically for blockchain. Some of the top ones include Solidity and Vyper.
Regardless, there are common tools for Web3 development. There will usually be the use of Node.js and a code editor. The editor can be just a plain text application for command line coding. Or, you can use a sophisticated IDE (a popular one is the Remix IDE). Then there will typically be the use of Web3 frameworks and libraries. And finally, a developer will work with a wallet to access the nodes.
At a very high level, there are often two types of developers. There is the backend developer, who has expertise on the intricacies of working with the blockchain. Next, there is the front-end developer. This person will focus on the UI, workflows, and design. And there usually does not require to be a significant understanding of the underlying technologies.
Immature: The development tools are still in the nascent stages. The result is that the UI’s can be cumbersome. There is often the lack of core features in the development environments.
Costs: Gas fees and other charges can be a major hindrance. For the most part, coders may be hesitant deploying apps. If anything, this means that the activity will be mostly with experimenting, such as with testnets.
Fragmentation: There are already many development tools on the market. This makes it difficult for coders to find the best one. There is also the risk that there will be much investment in a tool that ultimately fades in popularity.
Immutability: When a smart contract is added to the Ethereum blockchain, you generally cannot change it. This is certainly difficult, since the code is often far from perfect. Although, there are some workarounds, such as working with proxies to point to another smart contact.
But such problems are to be expected. They happened with other new platforms, such as with iOS or Android.
The good news is that there is much investment in building out the tools. There will also be more of a focus on low-code and no-code offerings, which will help to democratize Web3 development.
Now let’s take a look at some of the languages.
Rust
Rust has a similar syntax to C++. But it makes it easier to deal with memory leaks and other issues. There is also a high level of performance. This is especially the case when processing enormous amounts of data.
Note that the 2021 Stack Overvlow Developer Survey, which involved more than 80,000 developers, named Rust the most “loved” language.27 This was the same ranking for the six consecutive prior years. Just some of the companies that use the language include Amazon, Meta, Google, and Microsoft.
But Web3 is becoming a catalyst for growth for Rust . For example, platforms like Polkadot and Solana use the language to allow for the creation of smart contracts.
It’s true that there is a significant learning curve. But if you want to write high-performance Web3 applications that have strong security, Rust is a pretty good option.
In late 2021, Jack Dorsey tweeted: “rust is a perfect programming language.”28
Solidity
In 2014, Gavin Wood started the development of the Solidity language . The goal was to make it easier to create dApps for the Ethereum blockchain. At the time, the development was done using C++. While it was extremely powerful, it was also complicated.
By 2015, Wood finished the first version of Solidity. He also had the help of other top developers like Christian Reitwiessner, Alex Beregszaszi, Liana Husikyan, and Yoichi Hirai.
Now Solidity shares important features from C++. Note that both languages are object-oriented. This means you can organize an application into different components, which allow for reusability, and the inheritance of code and logic for other parts of a program. Object-oriented approaches tend to allow for more efficiency and scale. It can also be easier with collaborating with other coders.
Solidity remains quite popular with development on Ethereum. But you can use the language for many other blockchain platforms like Tron, Hedera Hashgraph, Avalanche, and Binance Smart Chain.
In terms of the syntax, it is similar to JavaScript. This has made it easier for programmers to learn the language.
The most common IDE (Integrated Development Environment) for Solidity is Remix . This is built to allow for the writing, running, debugging, and deploying of smart contracts on the blockchain. Keep in mind that the necessary libraries are included in the distribution. There is also a seamless integration of the Ethereum Virtual Machine (EVM).
Vyper
Vyper is for developing smart contracts for the Ethereum Virtual Machine and is No. 2 in the category, behind Solidity. The creator of this language is Vitalik Buterin (the original name was Viper). Then other contributors took over the project.
One of the hallmarks of Vyper is its security features. Compared to Solidity, they are more seamlessly part of the development process. It is also easier to implement the compiler.
Then there is audibility. This means that a non-technical person can look at the Vyper code and have a general idea of the workflow.
The syntax is similar to Python’s. Vyper has some object-oriented features like inheritance.
However, because of these benefits, there are fewer features compared to Solidity. The language is also less free from.
To help improve the security of Solidity, there is the annual Underhanded Solidity Contest. The goal is to write “seemingly innocent and straightforward-looking Solidity code which actually contains malicious behaviors or backdoors.”29 For 2022, the contest is to build a DeFi platform, and the first prize is a ticket to Devcon VII Bogota.
QuickNode
QuikNode is a blockchain infrastructure platform. Some of its marque customers include PayPal, Adobe, OpenSea, and Fireblocks. The company has over $40 million in venture backing.
With QuickNode , developers can quickly setup and integrate a blockchain system. A key to the success is the speed. You can access Ethereum, Bitcoin, Polygon, and other nodes within milliseconds or less. Another key to the success for the company has been the agility of its development team. In 2021, it added support for a new blockchain every month or so.
Growth has been particularly strong. During the first quarter of 2021, QuickNode was serving more than two billion requests per day for a community of close to 20,000 developers.30 To scale this, the company has built a multi-cloud infrastructure with more than 15 regions across four continents.
But the growth is likely to continue for some time. A study from Markets and Markets research predicts that blockchain infrastructure will increase at a compound annual rate of 67% – reaching $40 billion by 2025.31
Rich Analytics: You can get metrics on the performance of dApps, such as what smart contract methods are being called the most and when.
Monitoring: You get details on the trends in the traffic that streams into your nodes on an hourly, daily, weekly, or monthly basis.
Debugging: There are helpful tools to detect and fix problems with your dApps.
NFT Fetch Tool: No longer will you have to scrape logs. QuickNode has an API that aggregates a wallet’s NFTs.
Archive: The system tracks all states for smart contracts and logs them for future use.
Trace: You can re-execute a transaction with different types of data.
Integrations: There are many, such as for Metamask, Augur, and MyCrypto.
Developer Views
So what are some of the approaches and views of Web3 developers? Well, here’s a look at this from a company called GeodeFinance , which is a developer of staking technology.
Ethereum : “Currently, in our application, records of dozens of data sets belonging to each wallet should be kept in Ethereum. That’s because keeping them in a central database completely forces our users to trust us. That’s why every web component that appears on our interfaces comes from Ethereum, a decentralized database. So no one, including me, can change the numbers at will. Any updates are made to the extent that smart contracts allow, which is why I recommend every defi and web3 user make sure that contracts are written securely and without errors.”
Tools: “We first find an RPC (remote procedure call) endpoint. If a node is running on your local machine, a port of your computer is connected to Ethereum. Every call you send to a URL such as 127.0.0.1/8000 can now withdraw or send your balance and contract information from Ethereum. After connecting the provider, you also need to encode all the contract interactions. We are lucky that web3 libraries can be used in both Javascript and Python quite effectively.”
Proof-of-stake: “The proof of stake-based version 2 of the Ethereum named the ‘beacon chain’ is deposit-based. The main way I use Web3 libraries is to send API calls to these chains and load the data I get into our own smart contract via oracle services. Normally you can do this by simply calling a function in both Python and Javascript. But we use a multi-signature system called Gnosis to ensure data security with a secure consensus, which means we encode and sign the input data and send it to web3.”
Web3 Experience : “The main question and the hardship about all of these marvelous benefits of Web3 is the responsibility that comes with it. 5 billion people have access to the internet and still, most of them are not even comfortable with using it. Also, using Web3 is not as comfortable as using the usual Web2. Web3 is being built upon smart contract blockchains such as Ethereum, Avalanche, Solana, etc. To operate freely on these blockchains, you need to have all the responsibilities for your wallet, you need to interact with lots of different types of Decentralized applications and mostly and at the very basic level you need to know what you are doing within and on these decentralized applications. All of these factors can look frustrating at first for most people and it is frustrating when we consider the majority to be honest. There needs to be a whole paradigm shift, for Web3 to be the new standard, and in my point of view, it will take some time.”
Developing on Ethereum: “Ethereum has been around for nearly ten years. It has been the first one around with the smart contracts that gave the idea of money that is programmable. Also, Ethereum has a strong foundation with a highly capable team and the community. This strong foundation makes Ethereum attractive. From a developer perspective, there are much more resources on the internet for Ethereum than any other blockchain. You can find answers with several search engine queries. This is not the case for most of the blockchains even that are EVM compatible. Technology accumulates around Ethereum, which results in bigger communities, higher developer support, and thus higher adaptability. Tied with that attractiveness, the number of Decentralized apps that are being built around Ethereum is higher than other blockchains combined. This gap is slowly closing, however, the Ethereum dominance on Web3 infrastructure will be there for a while.”
Startups: “The main problems with Web3 are that it still can be considered as it is in its infancy and there is an adaptability problem. So for me, an interesting start-up should be solving these issues about Web3 and Ethereum. OpenSea and the NFT ecosystem have done a great job of arousing the interest of non-technical people and getting them into the space. With that showcase, we have seen that anybody can interact with the blockchains with a little effort. Even though the idea of OpenSea is still similar to the Web2 companies, there needs to be a transitional form, from centralized to decentralized for most people to understand what is really going on with the Web3.”
Hyper-Financialization : “Everything that users do in Web3 is through their wallet, unlike the current Web2 paradigm where people think that they are using most of these platforms for free. Of course, this is not the case but it is perceived that way. From what we know from behavioral economics, most of the people are loss-averse. The absolute value of -$10 dollars is much more than the absolute value of +$10 in people’s eyes. So in terms of Web3 adaptation for the general public, an interesting start-up should build up an architecture where people won’t feel like they are losing money when they act on a blockchain or Web3 platform.”
Alternatives to Ethereum : “For me, Avalanche is a great alternative to Ethereum, especially if you’re a new user or a small-level investor who’s only got a little bit of extra cash to experiment and learn with. Avalanche offers EVM compatibility with its C-Chain, and lower transaction costs with higher throughput thanks to the probabilistic nature of its consensus protocol. Also, Avalanche blockchain can have some advantages on scalability with its Subnets. In a future where Web3 is the new standard, leap-forward technologies like Subnets can still ensure decentralization while removing the burdens of scalability issues.”
Conclusion
In this chapter, we got an overview of the Web3 tech stack . It is still evolving, and this can make development challenging for entrepreneurs. Picking the wrong platforms and tools can blunt a startup’s progress. But this is always a risk for any nascent industry.
But despite all this, there is an emerging structure to the tech stock. The foundation is Layer 1, which involves the core technologies for the blockchain. Next, there is Layer 2. This is about systems to help improve the performance and efficiency. During the past few years, there has been significant interest from VCs in Layer 2.
And finally, there is Layer 3. This is about the applications, such as for DeFi, NFTs, gaming, and so on.
In this chapter, we also looked at the libraries and frameworks for Web3, such as Web3.js, Truffle, and Ethers.js. We also got an overview of the languages like Solidity, Vyper, and Rust.
As for the next chapter, we will look at building the Web3 team for a startup.